1 – Defined Benefit Pensions
These are also known as Final Salary Pensions and are mainly funded by employers, although sometimes employees will pay into them too.
These pensions give you a guaranteed future income, in the form of a pension, based on a set formula. The formula will be based on things like how long you worked for the employer, what you were paid and what percentage of your salary you paid into it.
The employer and the pension trustees are responsible for ensuring there is enough money available for you to receive your guaranteed pension for the rest of your life.
This is a big responsibility for them and is often very expensive for employers, as such these types of pensions are becoming rare and most employers these days offer a Defined Contribution Pension instead.
2 – Defined Contribution Pensions
Most personal pensions will fall into this category, including workplace pension schemes, stakeholder pensions and self-invested personal pensions (SIPPS).
The difference between these types of pensions is the amount you or your employer contributes and how that money is invested.
These differ from Defined Benefit because there is no guarantee as to the future pension income you will receive.
When you have finished saving into your pension, you will need to choose what to do with it and your two main options are to purchase an annuity or take it as drawdown.
3 – State Pension
You build up your entitlement to the state pension by paying National Insurance contributions from your salary. The Government decides what the normal retirement age is and what weekly pension amount you will receive. This can change, and changes are usually announced in the Budget.
An annuity is effectively an insurance policy that you purchase using the money in your pension pot, to guarantee you a monthly income for the rest of your life.
The main benefit is security as the product will pay you a regular amount each month until you die. If you live longer than the insurance company predicts, they may end up paying you more than you paid in, but if you die earlier you may end up receiving a lot less in payments than you originally paid in.
Plus, if you do die early your annuity dies with you, usually meaning your inheritors get nothing.
You can choose some options such as having the payments linked to inflation, getting paid earlier due to health issues or paying a spouse’s income in the event of your death. Although once selected these options can’t be changed and they will influence the monthly amount you receive.
You need to research the market for the best rates and options for your circumstances before you purchase an annuity.
With Defined Contribution pensions you can usually take 25% of your pension pot as a tax free lump sum. This will of course have an impact on the remaining pot and the value of any future pension income.
With a Defined Benefit pension it all depends on the scheme rules. Some have certain features around the amount of tax free cash you can take and the age at which you can access any cash. Again, this will have an impact on the amount of monthly pension income you receive.
Being an Independent Adviser means we can offer advice on the full range of investment products, also known as ‘whole of market’. That means when we select a range of products for our clients, the only factor we consider is are they right for the client. Restricted Advisers can only look at a limited range of products or providers, so they are not taking all of the options into consideration.
As we are experts in the full range of pension types and investment products, we can ensure that any product you choose is suitable for you and your particular circumstances. We will look at your attitude to risk and ensure your portfolio is aligned meaning that any rise and fall in interest rates is at a level with which you are comfortable, be that cautious or adventurous.
You also have more protection if you purchase an investment product based on our advice. We are regulated by the FCA and we follow strict procedures to make sure our advice is suitable.
Yes there is a fee to pay and you would avoid a fee if you chose to buy investment products yourself, without advice but you may be more likely to buy a product that doesn’t fully meet your needs or is unsuitable if you don’t take advice first. You may also be restricting your options as some products can only be accessed through an Adviser.
Yes, you should always ensure that an Adviser you choose is registered with the FCA and you can check the Financial Services register on their website www.fca.org.uk
If a Financial Adviser has a Status of Authorised on the register, this means they are given permission to provide regulated products and services.
If you are looking for pensions, investments, retirement income products such as annuities or general financial planning, then searching for a specialist adviser means they will have higher levels of qualifications to be able to give advice and recommend these types of products.
A good place to start would be with trusted websites where you can read reviews and check the qualifications of the Adviser, such as http://www.unbiased.co.uk or www.vouchedfor.co.uk
This is one of the main areas we'll work with you on. Your financial journey is unique to you, as is the outcome you are looking for.
We'll do a thorough assessment of where you are now and where you want to be, so we can give tailored recommendations. You will have a clear answer in the end.
Our process helps us identify the types of costs you are likely to incur and therefore how much you are likely to need.
We'll provide and explain clear cashflow models that show how each different financial route is likely to play out over time. We'll also show you how your costs are likely to change over time.
As part of addressing the other questions, if leaving a legacy and protecting your assets is important to you, we'll show you how best to structure your finances to achieve this.
We don't assume anything. So if you want to enjoy every last penny while you can, we'll help you plan for that too.
In its simplest form it is a government backed tax incentive to encourage you to save towards funding your retirement. The main benefits are: tax relief on your money as it goes into a pension, the opportunity to grow your money tax free within the pension and finally a percentage of the money, tax free, when you take it out of the pension. The big catch of course is that you can't access the funds until you reach minimum pension age and there are rules about how much you can pay in and accrue in your lifetime. However it still remains one of the most attractive options for building a retirement pot.
The normal minimum pension age is currently 55. However some schemes have rules where you may be allowed to access the plan early. We can establish the facts for each type of pension you hold. The real question is when should you access your pension. This is where we can really advise on the best financial decision making for your particular circumstances.
Generally speaking - yes. Almost all pensions allow for a lump sum withdrawal in some format. A portion of your pension will also be available tax free, usually this is equivalent to 25%. But again, there are some policies with different rules. Working out whether you should take a lump sum, how much and when, are all questions we can help you with. We'll work with you to support your personal goals and also to reduce your tax liability.
After you've taken any tax free cash that may be available, income from your pension is subject to Income Tax at your marginal rate. This applies whether you take a regular income from your pension or draw it on an ad-hoc basis. If your Personal Tax Allowance is still available, you may not pax tax on the income from your pension. PAYE and tax codes can cause complications but we have lots of experience in dealing with taxation and your pension.
This is a very personal decision and can only be made when several factors have been considered. The type of pension scheme and how you want to access it, how you feel about risk and swings in value, what your expectations are for returns and your own personal investment experience all play a role. Our job is to gather all of the data for each factor, understand what it is you're trying to achieve and then guide you through the options available to you. Then we'll monitor this over time, accommodate any changes in market conditions or your circumstances and make any investment changes necessary to keep you on track.
Neither do we! Yet. But with the right questions we can evaluate your options and give you clear advice on whether to consider tranferring your pension.
If you don't have a CETV, your pension scheme may allow you to request one.
The CETV places a monetary value on the pension scheme benefits you are entitled to, within the Defined Benefit scheme, and having a cash equivalent can present you with the option to transfer that value into another type of pension scheme, one where the scheme options could be preferable to you, for example, greater flexibility.
If you are considering transferring, the scheme trustees are required by law to confirm that you have received advice from an FCA registered adviser, with the correct permissions and qualifications, where the CETV exceeds £30,000. Not all financial advisers can provide this advice. We can.
This is fairly common. If you've worked for a few different employers, or set up a private pension in the past, you may have a collection of old pensions that you haven't looked at for some time.
We can help by getting a clear picture on exactly what you have now and start to assess whether they are in the right place for you.
There are so many types of pension available so understanding what's right for you and your specific goals is what's important.
Don't worry if you don't have all the paperwork. Come and see as we can work it all out.
Like everything, pensions have changed over time. As have the laws and legislations saying what we can and can't do with them.
The features and benefits of many modern pensions can be more attractive than some older pension schemes.
The things to consider would be flexbility, access options, charging structures or simply quality of service and access to information. However the most important factor is whether your pension or pensions meet your needs and allow you to reach your retirement goals.
We can advise if its appropriate for you to consider moving your pensions to a new provider or consolidating a number of pensions into one scheme.
This ties in with the age from which you can access your pension.
In most cases this will be the normal minimum pension age of 55 but there are exceptional circumstances where this might be different.